Mercury sells Metrix smart metering business

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Mercury sells Metrix smart metering business


17 December 2018 – Mercury NZ Ltd has today announced the sale of its smart-metering business, Metrix,
to intelliHUB Group for a cash consideration of $270m.

Mercury Chief Executive Fraser Whineray says the sale releases capital and resources, simplifies the company
and provides a tremendous opportunity for Metrix employees.

Metrix has been a strong performing business, operating and branded separately from Mercury’s core generation
and retail activities. It is one of the country’s leading smart metering solution providers, managing over 460,000
meters with household and commercial connection points. These features made it attractive to a focused owner
looking to advance the role of smart metering technologies in New Zealand and Australia even further, Mr
Whineray said.

Mercury’s retail business has metering service agreements with all significant metering service providers. Under
the sale agreement Mercury’s retail business will continue to be a key partner of Metrix, benefitting from the
metering services and innovation that Metrix will provide under its new ownership.

New natural owner
“The sale price achieved is recognition of the expertise, scale and opportunity Metrix represents. While Mercury
had its own strategy for Metrix, negotiations with intelliHUB Group have presented an opportunity that is timely for
both parties,” Mr Whineray said.

“IntelliHUB is a natural owner for the business given its experience and growth in Australia, and its expansion into
New Zealand, partnering with Trustpower to roll-out smart meters across its customer base.”

IntelliHUB’s CEO, Adrian Clark, said he was excited by the opportunity provided by Metrix.

“Metrix’s large installed meter base, deep customer relationships and innovation platform, make this a natural
acquisition for intelliHUB. It is also clearly aligned to our strategy of focusing on growth and innovation in smart
metering services,” Mr Clark said.

Transaction details
The transaction is expected to settle on 1 March 2019. The annualised reduction to EBITDAF from the sale is
forecast to be $28m. Further details are provided in the accompanying presentation.

Mercury’s proceeds from sale will be applied to the repayment of net debt in the first instance. Further application
of proceeds will be considered with the company’s FY2019 results.
Metrix’s Chief Executive Matt Olde will remain as a Mercury executive with an initial focus of ensuring a successful
Metrix transition to intelliHUB. All other Metrix employees transition as part of the sale.

Flagstaff Partners and Chapman Tripp acted as financial and legal advisers to Mercury on this transaction.


STOCK EXCHANGE LISTINGS: NZX (MCY) / ASX (MCY)

NEWS RELEASE

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ABOUT METRIX
Metrix evolved out of the Auckland Electric Power Board, drawing on more than 80 years of asset management
expertise and is one of the most experienced metering companies in New Zealand. Metrix’s core business is the
provision of Advanced Metering Infrastructure and services to New Zealand's electricity retailers. It employs around
90 people and is headquartered in Newmarket, Auckland.
ABOUT intelliHUB GROUP
intelliHUB Group is a fast-growing trans-Tasman entity that is exclusively focused on metering services that allow
our energy customers to differentiate with a better customer experience, innovative new products and a
commitment to quality. The business is supported by the majority shareholder Pacific Equity Partners (PEP) who
are a leading investment firm across Australia and New Zealand.

intelliHUB provides smart metering services in the New Zealand and Australian markets by engaging with energy
retailers to provide all aspects of their energy control and management solutions to the retailer’s end customers.


For further information:
Investors – Tim Thompson 0275 173 470
Media – Craig Dowling 0272 105 337














ABOUT MERCURY NZ LIMITED
Mercury’s mission is energy freedom. Our purpose is to inspire New Zealanders to enjoy energy in more wonderful
ways and our goal is to be New Zealand’s leading energy brand. We focus on our customers, our people, our
partners and our country; maintain a long-term view of sustainability; and promote wonderful choices. Mercury is
energy made wonderful. www.mercury.co.nz

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MERCURY SALE OF METRIX TO INTELLIHUB
1
MERCURY
>Mercury has entered into an agreement to sell its metering data and service business, Metrix, to intelliHUBGroup
>intelliHUBGroup is owned by PEP (Pacific Equity Partners) and L+G (Landis+Gyr)
>intelliHUBGroup was formed through a merger of:
−intelliHUB, a former subsidiary of L+G, a leading global smart meter provider; and
−Acumen, a former subsidiary of Origin Energy, a leading Australian energy retailer with full accreditation to operate in
the Australian and New Zealand market
>The sale price of $270m is payable in cash with settlement expected on 1 March 2019
>As part of the transaction Mercury and intelliHUBGroup will enter into a Metering Services Agreement
>The agreement creates a long term meter services arrangement inline with market standards for these services

2
MERCURY
>New Zealand roll-out is largely complete with ~80% of homes with smart
meters
>Trustpower, the last large retailer to deploy smart meters, has recently
commenced roll-out in partnership with intelliHUB
>Mercury looked to leverage its expertise into Australia by participating in
AGL’s sale of its metering business, Active Stream, but was ultimately
unsuccessful
>A higher value owner existed with intelliHUBas it grows in New Zealand
and Australia
>The divestment simplifies Mercury’s core operations
>Mercury has Metering Service Agreements with all significant metering
service providers and will continue to be able to leverage smart meter data
to provide innovative products and services to customers
ONGOING REVIEW OF CAPITAL ALLOCATION

FINANCIAL IMPACT
3
MERCURY
Other Revenue
(25)Loss of Metrix third party metering revenue
Third Party Metering
(25)New Metering Service Agreement with Metrix
Direct Costs of Other Revenue
4Metrix related direct costs of revenue
Operating Expenses
18Metrix related operating expenses
EBITDAF
(28)
Depreciation
21
Depreciation of smart metering assets and
associated technology infrastructure
Interest
8
Tax
-
Net Profit After Tax
1
Free Cash Flow
(17)Including a reduction in SIB Capex of $3m p.a.
>Sales price represents an EBITDAF multiple
of >9.5x
>Annualised EBITDAF impact of -$28m
>Proceeds will be applied to the repayment
of net debt in the first instance
>Further application of proceeds will be
considered with the company’s FY2019
results
ANNUALISED FINANCIAL IMPACT
1
1
Based on forecast FY2019 financials